International Journal of Production Economics 185 (2017) 162–174

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

The impact of operations and supply chain strategies on integration and MARK
performance☆
⁎
Yinan Qia, Baofeng Huob, Zhiqiang Wangc, , Hoi Yan Jeff Yeungd
a
School of Business, University of International Business and Economics, Beijing, PR China
b
School of Management, Zhejiang University, China
c
School of Business Administration, South China University of Technology, Guangzhou, China
d
Department of Decision Sciences and Managerial Economics, Faculty of Business Administration, The Chinese University of Hong Kong, Shatin, N.T., Hong
Kong

A R T I C L E I N F O A BS T RAC T

Keywords: This study aims to develop a comprehensive model that facilitates an understanding of relationships among
Operations strategy operations strategies (OSs), supply chain strategies (SCSs), supply chain integration (SCI), and firm
Supply chain strategy performance. It is a start to understand the role of operations strategies in supply chain design. We adopt
Supply chain integration structural equation modelling to test the relationships based on data collected from 604 Chinese manufacturers.
Performance
The results show that a lean supply chain is appropriate for firms placing higher priorities on cost, quality and
delivery strategies, while an agile supply chain is appropriate for firms competing on the flexibility strategy.
Furthermore, both lean and agile SCSs require higher levels of SCI in terms of internal and external integration,
but lean SCSs have a significantly higher impact on external integration than agile SCSs. The study refreshes the
links between order winner/qualifier and supply chain strategies. Clear-cut differences exist concerning the role
of operations strategy in supply chain management, indicating that appropriate supply chain design is very
important for firms to achieve their operations objectives. This study contributes to a better understanding of
the match between operations strategies and supply chain strategies, and offer a practical insights on
investments in the development of supply chain integration.

1. Introduction
As an electronic firm with more than one million employees and 60
billion USD annual sales, Foxconn adopts a special operations and
supply chain strategy and activity – lean strategy and supply chain
integration (SCI). Foxconn reduces wasters and costs through several
ways. Internally, they build the organization culture of “time is money”,
teamwork and resource sharing, process improvement, and continuous
quality control to enhance efficiency and reduce costs. Externally, they
use just-in-time (JIT) and vendor-management-inventory (VMI) meth-
ods to integrate with suppliers to reduce purchasing costs. They also
involve designers of Apple to help them to improve product quality,
which leads to the wonderful product of iPhone.
Many studies have investigated operations strategies (OSs) since
Skinner's (1969) seminal work. However, one of the major weaknesses
in this field is that the OS theory fails to make contextual considera-
tions in terms of supply chain, especially in a developing economy, in
which technologies are relatively weak and levels of management are
low (Demeter and Boer, 2011). The changes to the business unit's
strategy and environment must necessitate the change of its supply
chain strategy, but there is no clear answer about how to change in the
current literature (Perez-Franco et al., 2016). Thus, it is interesting and
instructive to reconsider OSs from the perspective of supply chain
management (SCM) in an emerging market like China. Furthermore,
the decisions on production and supply chain network design become
increasingly important for the firm to obtain competitive advantage
(Macchion et al., 2015).
With the increasing importance of SCM, supply chain strategies
(SCSs) should play important roles in defining firms’ OSs. From a
strategic SCM perspective, a supply chain's design should be aligned
with a firm's missions and strategies (Qi et al., 2011) and the SCSs
work as a logical bridge between firms’ higher level strategy and its
supply chain activities (Perez-Franco et al., 2016). Fisher (1997) argues
that a firm's SCSs should match its product characteristics. The
literature has generally testified to such a relationship (e.g., Qi et al.,
2009). However, a firm's operational focus is to determine an order

☆
This research was supported by National Natural Science Foundation of China [#71525005, #71473087, #71420107024 and #71372058].
⁎
Corresponding author.
E-mail addresses: yinanqi@gmail.com (Y. Qi), baofenghuo@gmail.com (B. Huo), bmzqwang@scut.edu.cn (Z. Wang), jeff@baf.msmail.cuhk.edu.hk (H.Y.J. Yeung).

http://dx.doi.org/10.1016/j.ijpe.2016.12.028
Received 17 July 2015; Received in revised form 21 December 2015; Accepted 24 November 2016
Available online 22 December 2016
0925-5273/ © 2016 Elsevier B.V. All rights reserved.
Y. Qi et al.
winner (a criterion that differentiates a firm's products/services from
those of others) or order qualifier (a screening criterion that allows a
firm's products/services to be candidates for purchasing in the market)
in terms of OS strengths (e.g., cost, quality, delivery and flexibility) but
not SCS strengths. Product characteristics comprise the post-hoc
description of a firm's products that have already appeared in the
market, and order winners and qualifiers are the attributes a firm's
products should have even prior to the product design stage. Therefore,
order winners and qualifiers are factors that should be determined
during the strategy development process. In fact, the determination of
order winners and qualifiers is the key process of the development of a
firm's OSs (Jacobs and Chase, 2011). In accordance, Jacobs and Chase
(2011) argue that OSs and SCSs should be considered systematically to
build effective supply chains for manufacturers with various order
winners. In the SCS literature, most studies such as those by Naylor
et al. (1999), Mason-Jones et al. (2000), Christopher (2000) and Towill
and Christopher (2002) have conceptually argued over the relation-
ships among order winners, order qualifiers and SCSs. Recently, Roh
et al. (2014) investigated the relationship for responsive supply chain
strategy and suggested more supply chain strategies. A large-scale and
rigorous empirical study is imperative to explore such a relationship
(Naim and Gosling, 2011).
In addition, SCI practices are important for the effectiveness of
SCM. Much of the prior SCI literature has focused on validating the
benefits of SCI practices (Huo et al., 2014a, 2014b). When a firm has a
predetermined strategy, the kind of SCI that is appropriate for its
corresponding SCS design is a significant issue. However, few studies
have explored enablers of SCI (Wang et al., 2016), especially from the
strategic perspectives, which are very important to understanding the
role of SCI in a supply chain (Zhao et al., 2011).
While China has become a global manufacturing center and plays
an important role in global supply chains, SCM in China attracts both
practitioners and academia (Zhao et al., 2007). Most previous studies
on operations and supply chain strategies have been conducted in the
context of Western cultures (e.g. Droge et al., 2004; Germain and Iyer,
2006). There is a need for testing and validating theories of operations
and supply chain strategies in different cultural settings. The collecti-
vism culture in China provide a fertile ground for testing and validating
these theories developed in Western cultures. Furthermore, firms in
China have different histories and varying cultures and management
philosophies in the collective culture, SCI is deemed more important in
maintaining relationships, as compared to that in an individualistic
culture. Therefore, we conduct this study using data collected from
Chinese manufacturers.
This study builds and empirically tests a comprehensive model to
describe how OSs influence SCSs and how SCSs influence SCI practices that
lead to financial performance in the Chinese supply chain context. By
extending firm-oriented OSs to supply-chain-oriented SCSs and linking
with SCI practices, this study contributes to OSs, SCSs, and SCI literature
and practices in several ways. First, this study reveals impacts of four types
of OSs on two types of SCSs. Second, this study investigates effects of SCSs
on SCI. Third, this study explores relationships between SCI and financial
performance. Fourth, this study provides guidelines for managers to decide
how to devote their efforts and resources regarding different types of OSs,
SCSs, and SCI, as well as how to manage various types of SCI to achieve
financial performance.
2. Theoretical foundations and conceptual model
2.1. Literature review
An OS comprises ‘broad policies and plans for using the resources
of a firm and should be integrated with corporate strategy’ (Jacobs and
Chase, 2011, p. 23). These policies and plans are commonly described
according to the priorities of four competitive dimensions in Skinner's
(1969) seminal work, including cost, quality, flexibility and delivery.
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International Journal of Production Economics 185 (2017) 162–174
Previous literature pays much attention to understanding the compat-
ibility of OS with environments, managerial choices and competitive
strategies (e.g., Corbett, 2008; Paiva and Vieira, 2011). Although OS
has been well understood from an organization-wide perspective,
evolving practices and theories may require a new understanding of
OS in the supply chain context. SCM requires supply chain-based
strategies and practices beyond the firms’ boundaries. Recent work
focused on exploring the connections of OSs with knowledge manage-
ment (Hussain et al., 2015), competitive strategies (Khalili Shavarini
et al., 2013), competitive advantages (Liu and Liang, 2015), or
sustainability practices (Longoni and Cagliano, 2015). However, very
few OS studies are investigated from the SCM perspective. For
example, Quesada et al. (2008) linked order winning strategies with
supply chain integration. There is a call for further investigation of the
role of OSs in forming SCSs and supply chain practices.
An SCS describes how a firm can gain competitive advantages
through its supply chain capabilities, such as cost efficiency, response
speed and flexibility (Qi et al., 2011). Prior literature has classified
SCSs into two generic categories: lean and agile (Fisher, 1997; Yusuf
et al., 2004). While a lean SCS efficiently streamlines the whole supply
chain, an agile SCS focuses on the reconfiguration of a supply chain in
response to uncertain and dynamic environments (Naylor et al., 1999).
The use of new technologies, such as radio frequency identification
(RFID), and new management techniques such as postponement, could
mitigate internal OSs' conflicts in achieving SCSs (Kwok and Wu,
2009). Hilletofth (2009) also argued that a differentiated SCS required
the combination of different supply, manufacturing, and distribution
strategies based on the observations in two cases. A recent work by
Morita et al. (2015) empirically tested the alignment of SCS and
product characteristics and how this alignment should be conducted.
As we know, the link between SCS and SCI has not been established
and tested in the literature. Therefore, an integrated framework
connecting OS, SCS, and SCI will benefit the OS literature from the
SCM perspective.
2.2. The effect of OSs on SCSs
When developing an OS, firms should identify their customers’
needs for different products and translate them into either order
winners to differentiate themselves from competitors or order quali-
fiers to bring themselves to the market. Based on the order winner and
qualifier classifications, firms are required to build operational infra-
structures and capabilities accordingly, such as supply chain develop-
ment and management infrastructures and capabilities. Thus, following
an OS, the development of an appropriate SCS is necessary. Kim et al.
(2014) suggested an integrated process of strategy formation, indicat-
ing the roles of OS in forming SCS.
Organizational capability theory provides an effective theory lens
for relationships among OSs, SCSs, SCI and performance.
Organizational capability can be defined as the “ability to perform
repeatedly a productive task which relates either directly or indirectly
to a firm's capacity for creating value through effecting the transforma-
tion of inputs into outputs” (Grant, 1996, p. 377). It is a firm's intended
or realized competitive performance or operational strengths in
operations management (Peng et al., 2008). Among various organiza-
tional capabilities, one major capability is dynamic capability that
refers to the ability to integrate, build, structure, and reconfigure
internal and external competencies to meet requirements of changing
environments to generate multiple sustained competitive capabilities
simultaneously in dynamic, unstable, or volatile environments (Peng
et al., 2008; Teece et al., 1997). Both operations and supply chain
strategies are dynamic capabilities because they can help firms to
repeatedly conduct productive tasks which relate to the transformation
of inputs into outputs.
From the perspective of organizational capability, when a firm has a
high level of absorptive capability to understand OSs, the firm will be
Y. Qi et al.
more likely to learn from external partners and understand their
businesses to facilitate the implementation of SCSs. As indicated by
organizational capability theory, internal OS capabilities can directly
improve external SCS capabilities, because they can use internal OS
resources as a base to develop external SCS resources. In details,
internal OS capabilities (e.g. low cost, high quality) are positively
related to external SCS capabilities, because the OS culture and
atmosphere based on low cost or high quality of the internal operations
of the firms can spread from within the firm to the outside and to the
whole supply chain. From a cumulative capability perspective, internal
OS capabilities, which focus on a firm's internal operations manage-
ment, are the base from which external SCS capabilities can be
developed, which focus on a firm's external operations management.
This is also consistent with the shift from the management of a sole
firm to the management of a supply chain. In conclusion, OS
capabilities are positively related to SCS capabilities.
A lean supply chain follows the tenet of lean thinking that
emphasises waste and interruption reductions when providing a flow
of goods, services and technologies from suppliers to customers. Thus,
the ‘lean thinking’ and subsequent lean supply chains adopt various
management techniques and practices such as JIT, Kanban and TQM
to reduce overall costs, enhance product quality, and shorten delivery
times (Ardalan and Diaz, 2012). Such objectives of the lean supply
chains are aligned with the OSs of firms that have order winners on
cost, quality or delivery. However, while the lean paradigm is better for
higher and predictable demands in a stable environment, it is
inefficient in a volatile marketplace (Katayama and Bennett, 1996).
The increasing flexibility of the changing demands and production
necessary to meet the requirements of a dynamic environment could
benefit the leanness strategy. Therefore, we propose the following
hypotheses.
Hypothesis 1a/b/c/d. The degree of emphasis on OSs in terms of
cost/quality/delivery/flexibility is positively related to the extent to
which lean SCSs are used.
Goldman et al. (1995, p. 4) describe agility as ‘a comprehensive
response to the business challenges of profiting from rapidly changing,
continually fragmenting, global markets for high-quality, high-perfor-
mance, customer configured goods and services’. Thus, agility is mainly
enabled by flexible processes in a product supply chain framework
(Stavrulaki and Davis, 2010). High-quality products, speedy and
reliable delivery and flexibility are keys for manufacturers to provide
customised products to customers in a timely way and to gain
competitive advantages in an increasingly volatile market.
Although the current OS trend reflects the importance of flexibility,
contrary to the leanness that focuses on efficiency (Stavrulaki and
Davis, 2010), the implementation of an agile supply chain implicates
the risks of increasing product design and production costs (Simchi-
Levi et al., 2011). As highlighted by Naylor et al. (1999), whereas agility
focuses more on flexibility and does not make the elimination of all
wastes a prerequisite, leanness focuses on the elimination of all non-
value activities. Moreover, a firm that selects low cost as an OS is likely
to reduce the production cost through the economy of scale, which can
also be realized through agile SCS. Therefore, we propose the following
hypotheses.
Hypothesis 2a/b/c/d. The degree of emphasis on an OS in terms of
cost/quality/delivery/flexibility is positively related to the extent to
which an agile SCS is used.
2.3. The effect of SCSs on SCI
SCI can be defined as the degree to which a function or organization
strategically collaborates with internal functions or external supply
chain members to manage the intra- and inter-organizational processes
necessary to achieve effective and efficient flows of products, services,
information, money and decisions with the objective of providing
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International Journal of Production Economics 185 (2017) 162–174
maximum value to the customer (Zhao et al., 2008). Internal and
external integration are two major dimensions of SCI and play different
roles. Whereas the former argues that the departments within a firm
should function as part of an integrated process, the latter emphasises
the importance of establishing a close relationship with external supply
chain partners. Internal integration refers to the degree to which a
manufacturer structures its own organizational strategies, practices
and processes into collaborative, synchronized processes, in order to
fulfill its customers’ requirements and efficiently interact with its
suppliers (Flynn et al., 2010). In contrast, external integration refers
to the degree to which a manufacturer partners with its external
partners to structure inter-organizational strategies, practices and
processes into collaborative, synchronized processes (Flynn et al.,
2010).
SCI can be viewed as organizational capabilities (Huo, 2012).
According to organizational capability theory, SCS capabilities can be
transferred to supply chain integrative capabilities. The vision of supply
chains defined by SCSs can facilitate firms to develop communication,
process coordination, and joint planning among functions and external
supply chain partners. The learning capabilities formed in the devel-
opment of SCS can also help firms to build integrative relationships
among functions and supply chain partners.
The key to lean SCM is to provide a flow of goods, services and
technologies from suppliers to customers without creating waste (Jasti and
Kodali, 2015). This means that the competitive focus of a lean supply chain
is to reduce cost. Therefore, it is imperative for leanness to organise a highly
efficient and integrated production and logistics process through which
manufacturers can increase productivity and reduce process-related costs to
produce high-volume products. Such a high volume of production processes
requires high efficiency through automation and real-time information
sharing within an organization. Therefore, we propose the following
hypothesis:
Hypothesis 3a. The degree of emphasis on a lean SCS is positively
related to the extent to which internal integration is adopted.
Lean manufacturers should maintain good relationships with their
suppliers to ensure the availability of raw materials in order to make
SCI work successfully (Qrunfleh and Tarafdar, 2013). Thus, the
successful implementation of lean supply chains is more likely to
produce a cooperative supplier relationship and a high degree of
information sharing (Choi and Wu, 2009). Jacobs and Chase (2011)
also emphasise that a long and rigid relationship with a small set of
suppliers is one of the major characteristics of a lean supply chain. A
lean supply chain also requires intensive communication with custo-
mers, which offers opportunities to improve the accuracy of the
demand information exchanged, thereby reducing inventory obsoles-
cence. Therefore, we propose the following hypothesis:
Hypothesis 3b. The degree of emphasis on a lean SCS is positively
related to the extent to which external integration is adopted.
An agile supply chain emphasises market sensitivity and a quick
response to the customer. To provide these elements, it should increase
its process and functional integration through the use of advanced
manufacturing and information technology (Gunasekaran and Yusuf,
2002). Moreover, agile supply chains could quickly transfer customers’
demand to all functions within the manufacturer to facilitate real-time
connections through information technologies and systems and process
coordination among different functions (Roh et al., 2014). Firms with
an agile SCS can flexibly strengthen the control of physical transforma-
tion processes and other logistics activities (Cachon and Fisher, 2000).
Agile supply chains also push all internal functions to work together to
meet changing customer requirements. Firms with an agile SCS are
also capable in the formation of teams to effectively resolve conflicts,
problems, and mistakes (Qrunfleh and Tarafdar, 2014). Therefore, we
propose the following hypothesis:
Hypothesis 4a. The degree of emphasis on an agile SCS is positively
Y. Qi et al.
related to the extent to which internal integration is adopted.
Agility aims at providing products first, fastest and best (Kisperska-
Moron and De Haan, 2011). For example, the agile supply chain
requires collaborative communication with customers to provide high
value-added products. Unlike the lean supply chain, which is often
criticized due to the provision of various products without considering
customer requirements, the agile supply chain pays more attention to
customer integration and leveraging customer-side information
(Qrunfleh and Tarafdar, 2013). An agile supply chain is also deter-
mined by the consistent, on-time receipt of the correct number and
type of parts from multiple suppliers (Ahmad and Schroeder, 2001).
Mutual information sharing with suppliers is required for manufac-
turers to be responsive. To summarize, agile supply chains push firms
to integrate with external partners to generate opportunities to leverage
the intelligence embedded in collaborative processes and enable firms
to create values and detect demand changes quickly. Therefore, we
propose the following hypothesis:
Hypothesis 4b. The degree of emphasis on an agile SCS is positively
related to the extent to which external integration is adopted.
2.4. The effect of SCI on financial performance
According to organizational capability theory, supply chain inte-
grative capabilities are drivers of firm performance (e.g. Huo, 2012).
Verona (1999) proposed that both internal and external integrative
capabilities improve process efficiency and product effectiveness.
However, Verona (1999) did not empirically test these relationships.
Extensive literature has found roles of SCI in achieving financial
performance (e.g. Wong et al., 2017, Demeter et al., 2016, Flynn
et al., 2010; Kim, 2009).
Internal integration can improve financial performance. Stank et al.
(2001) identified internal integration as the most important differen-
tiator of firm performance, and many other studies found the relation-
ship between internal integration and financial performance. For
example, Swink et al. (2007) found that strategy integration and
product-process integration influence financial performance.
Similarly, external integration can also influence financial perfor-
mance. Frohlich and Westbrook (2001), Schoenherr and Swink
(2012) and Zailani and Rajagopal (2005) found that firms with the
widest degree of arcs of integration achieve the highest level of
performance. Das et al. (2006) and Narasimhan and Kim (2002) also
found that supplier integration improves financial performance. The
impact of customer integration on financial performance is inconsis-
tent. While some studies (e.g. Flynn et al., 2010) failed to find a
significant relationship between customer integration and financial
performance, others studies (e.g. Koufteros et al., 2005; Narasimhan
and Kim, 2002) found positive effects of customer integration on
financial performance. Furthermore, Droge et al. (2004) found that
supplier and customer integration can enhance market share and
financial performance. We propose that internal and external integra-
tion contribute to manufacturers’ financial performance, leading to the
following hypotheses.
Hypothesis 5. Internal integration is positively related to financial
performance.
Hypothesis 6. External integration is positively related to financial
performance.
Because time and scale of economy may influence strategies and
activities of firms, we include firm age and firm size as control variables
in the conceptual model. Fig. 1 shows the conceptual model with
proposed hypotheses, which are tested in the following sections.
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International Journal of Production Economics 185 (2017) 162–174
Cost Lean Supply Internal
Strategy Chain Strategy Integration
Quality
Strategy
Financial
Performance
Delivery
Strategy
Controls:
Agile Supply External Age
Flexibility
Chain Strategy Integration Size
Strategy
Fig. 1. Proposed model and hypotheses.
3. Research methodology and analyses
3.1. Questionnaire design
The constructs and measurements of this study are shown in
Appendix A. Our questionnaire adopted the most commonly used OS
measures related to cost, quality, delivery and flexibility (e.g., Ward
and Duray, 2000; Ward et al., 1995). Respondents were asked to
indicate the importance of their operational priorities according to the
four constructs on a 7-point Likert scale with 1 (‘most unimportant’)
and 7 (‘most important’). We used three items including low produc-
tion cost, productivity, and capacity utilization to measure cost
strategy, three items including new product introduction, change
product mix and line to measure flexibility strategy, three items
including durable product, conformance quality, and reliable product
to measure quality strategy, and two items including delivery schedule
and time to measure delivery strategy. The measures are also tested by
Zhao et al. (2006) and Quesada et al. (2008).
The SCS measurement items were extracted from a variety of
sources including Katayama and Bennett (1999), Christopher (2000),
Mason-Jones et al. (2000), Heikkila (2002) and Yusuf et al. (2004).
Respondents were asked to indicate the extent to which they agreed the
supply chains of their firms’ major product/product mixes had certain
characteristics on a 7-point Likert scale with 1 (‘strongly disagree’) and
7 (‘strongly agree’). We used five items including structure change,
flexible partnership, customization, flexible supply, and response to
changes to measure agile SCS, and four items including waste reduc-
tion, low cost-supplier selection, small supplier number, and predict-
able production to measure lean SCS. The measure of SCS has been
validated in Qi et al. (2009) and Qi et al. (2011).
The SCI measures were adapted from the literature (Chen and
Paulraj, 2004; Narasimhan and Kim, 2002; Stank et al., 2001).
Respondents were asked to indicate the extent of their SCI practices
on a 7-point Likert scale with 1 (‘not at all’) and 7 (‘extensively’). We
used four items including integrative systems, data integration, in-
ventory integration, and flow integration to measure internal integra-
tion, and ten items including partnership, information sharing, and
process coordination with supplier and customers to measure external
integration. The SCI measures appear in the recent studies (Huo et al.,
2014a).
The financial performance items were based on De Toni and
Tonchia (2001) and Vickery et al. (2003). Respondents were asked to
indicate their performance in certain areas relative to their competitors
on a 7-point Likert scale with 1 (‘much worse’) and 7 (‘much better’).
We used six items including ROI, ROS, and market sharing to measure
financial performance.
To ensure the reliability of the questionnaire, we pilot tested it in
more than 40 Chinese manufacturing firms. We discussed survey
questions face-to-face with managers after they filled out the ques-
tionnaire and clarified the meaning of the questions with them. Based
on their feedback, we modified, added or deleted questions, making
Y. Qi et al. International Journal of Production Economics 185 (2017) 162–174

Table 1
Respondent profile.

A. Job title Percent (%) B. Years with the Percent (%)

firm

General manager 13.9 <5 46.7

Production and operations 40.5 5–9 28.3
manager
SCM and logistics manager 0.7 10–14 13.2
Purchasing and supply manager 0.5 15–19 6.0
Factory director 16.1 ≥20 5.8
General manager assistant 9.6 Total 100
Chief financial officer 2.8
Marketing manager 6.5
Research and development 4.5
manager
Others 4.9
Total 100

them more understandable and relevant to practices in China. The data
collected from the pilot tests were also used to check the face validity of
the measures.
3.2. Data collection
In this study, a mail survey was used to collect the required data.
The supply chain, operations and general managers in manufacturing
firms were selected as key respondents. Table 1 shows that our
respondents are capable of answering questions about OSs, SCSs,
SCI, and financial performance. Similar to previous SCM studies in
China (e.g. Zhao et al., 2011; Flynn et al., 2010), we used only one key
informant to answer all questions in order to reduce the time and costs
of data collection.
Geographically, China is a large country and it is very difficult to
obtain samples from all parts of China. Therefore, we chose three
representative cities from economically advanced areas in China:
Beijing, Shanghai, and Guangzhou. Shanghai represents the Yangtze
River Delta, which has China's highest GDP per capita. Guangzhou
represents the Pearl River Delta, which has China's second highest
GDP per capita. Both are located in eastern and southern China, which
has the highest degree of marketization and economic reform. Beijing
represents the Bohai Sea Economic area and reflects an average level of
economic reform and marketization. All these three cities represent
important industrial regions with a broad variety of manufacturing
activities. Other areas of China have a low level of economic reform and
marketization and are less likely to have advanced SCM activities. We
used a database provided by Beijing Ebuywww Info Co. Ltd in our
sampling. Founded in August 2000, Ebuywww provides a high-quality
list of Chinese firms with information of key informants. The source of
firm information is based on a close relationship between Ebuywww
and various business journals, the government statistical bureaus, and
various industrial societies. The data provided by Ebuywww are used
by numerous large multinational firms to identify and assess potential
suppliers in China. Following the suggestion of Li et al. (2005), we
excluded the firms with fewer than 100 employees because they were
seldom involved in sophisticated SCM activities. Among our sample
targets, 9764 firms met this criterion.
Our research assistants reached out to 3187 manufacturing firms
selected randomly from the database. However, only 2724 firms had
correct contact information. In the end, 614 completed questionnaires
were received, representing a response rate of about 22.5%. After
screening the completed questionnaires, we removed 10 that had not
been completed properly and used 604 responses in subsequent
analyses (about 200 samples in each city of Beijing, Shanghai, and
Guangzhou).
We evaluate non-response bias by comparing the industry distribu-
tions of the respondent firms with the population (Malhotra and
Grover, 1998). Table 2 shows that percentages of the respondents are
close to those of firms in the population in most industries. A chi-
square test (χ2=1.17) indicates no significant difference between the
respondent distribution and the overall population (p > 0.05), suggest-
ing that our sample was not biased towards any particular industry. We
also compare early and late responses on physical assets, annual sales
and number of employees with the t-test and find no significant
difference, indicating that a non-response bias does not appear to be
a major concern in this study.
Since we used one informant to answer all questions, potential
common method bias is checked (Craighead et al., 2011). Appropriate
arrangements of questionnaire items can reduce respondents’ consis-
tent motive to a certain extent to decrease the common method bias
(Podsakoff et al., 2003; Podsakoff and Organ, 1986). In the ques-
tionnaire design stage, we adopted different instructions for different
scales, and the adjacent variables in the conceptual model were put in
distinct sections. The items comprising the scales of OSs, SCSs, SCI and
performance are not similar in content, and the constructs are
measured through 2–10 items. Furthermore, respondents are familiar
with the constructs because they have been in a relatively senior
position with responsibility for SCM for many years. Harman's one-
factor (or single-factor) test of common method bias was performed
(Sanchez and Brock, 1996). The model fit indices of χ2 (740)=5398.63,
NNFI=0.89, CFI=0.90 and n=0.13 are unacceptable and significantly
worse than those of the measurement model. This suggests that a
single-factor model is not acceptable, and thus that any potential

Table 2
Industry distribution of respondents and population.

Industries Respondents Population

Food and beverage 10.3% 8.7%

Electronic, electrical and communication equipment 19.7 19.3
Machinery and transportation equipment 24.8 26.5
Textile and garment 32.9 33.4
Plastic, latex, chemicals and petroleum 12.3 12.2
Total 100% 100%

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Table 3
Correlations, means, standard deviations and reliability.

Lean Agile CS QS DS FS II EI FP

Lean 1
Agile 0.29* 1
Cost strategy (CS) 0.59* 0.25* 1
Quality strategy (QS) 0.48* 0.29* 0.47* 1
Delivery strategy (DS) 0.57* 0.31* 0.59* 0.54* 1
Flexibility strategy (FS) 0.38* 0.52* 0.39* 0.43* 0.50* 1
Internal integration (II) 0.41* 0.40* 0.46* 0.47* 0.45* 0.48* 1
External integration (EI) 0.57* 0.46* 0.53* 0.53* 0.52* 0.48* 0.68* 1
Financial performance (FP) 0.24* 0.26* 0.30* 0.33* 0.28* 0.31* 0.48* 0.36* 1
Mean 5.29 4.87 5.45 5.66 5.80 5.34 5.03 5.09 4.64
S.D. 0.897 0.847 1.061 0.931 0.930 0.943 0.973 0.834 0.902
Cronbach's alpha 0.768 0.737 0.826 0.783 0.578a 0.779 0.851 0.889 0.896

*
Correlation is significant at the 0.01 level.
a
Correlation coefficient between two items.

common method bias is small. To further test common method bias,
one measurement model including only the traits and one including a
method factor in addition to the traits were tested (Widaman, 1985;
Paulraj et al., 2008; Podsakoff et al., 2003; Williams et al., 1989). The
results of the method factor model marginally improved model fit
(RMSEA by 0.01, NNFI by 0.01, CFI by 0.00), with the common
method factor accounting for only 1.9% of the total variance. The path
coefficients of the trait factors and their significance were similar
between the two models, suggesting that they were robust, despite the
inclusion of a method factor (Paulraj et al., 2008). In summary, we can
conclude that common method variance bias is not an issue in this
study.
3.3. Psychometric tests
We use a principal component exploratory factor analysis (EFA)
with varimax rotation to detect the underlying dimensions. Next, we
use CFA to test construct validity, including convergent and discrimi-
nant validity. In the first step, items in the measurement model are
deleted if their factor loadings are smaller than 0.50. In the second
step, another EFA is done to assess unidimensionality (Appendix A).
Table 3 shows the correlations, means, standard deviations, and
reliability of the constructs. All Cronbach's alpha values are above
0.70 and hence acceptable. The significant and high correlation (0.58)
between two items of delivery strategy ensures the reliability of the
construct. Furthermore, all composite reliability values are higher than
0.70 (0.71–0.90). Therefore, reliability is achieved.
The model fit indices of CFA are χ2(704)=1831.78, RMSEA=0.056,
CFI=0.97 and NNFI=0.98, which are acceptable. In addition, all factor
loadings are greater than 0.50 (0.51–0.89) with t-values greater than
2.0 (Appendix A). Most of average variance extracted (AVE) values of
the constructs are high than 0.50. Though several items have relatively
low factor loadings, which lead to a relatively low AVE, we still keep
Lean Supply
Cost Internal
0.39
Strategy Chain Strategy 0.51 Integration
0.16 0.63
Quality
Strategy
0.40
Delivery
Strategy
0.39
Agile Supply External
Flexibility
Strategy 0.71 Chain Strategy 0.39 Integration
Fig. 2. Estimated SEM model.
these items because they are very important for the concept of the
constructs (Flynn et al., 2010). The results indicate that convergent
validity is ensured. We assess discriminant validity by building a
constrained CFA model for every possible pair of constructs, in which
the correlations between the paired constructs are fixed at 1.0. This is
compared with the original unconstrained model, in which the
correlations among the constructs are freely estimated. The significant
difference in Chi-square statistics between the constrained and un-
constrained models indicates a high discriminant validity (Fornell and
Larcker, 1981). In this study, all 36 differences of χ2 are significant at
the 0.01 level, indicating that discriminant validity is ensured.
Furthermore, except for the AVE value (0.44) of external integration
and its squared correlation (0.46) with internal integration that is
correlated with external integration conceptually (Zhao et al., 2011),
the AVE value for each construct is greater than the squared correlation
between that construct and other constructs as suggested by Fornell
and Larcker (1981), providing further evidence of discriminant valid-
ity.
3.4. SEM model and hypotheses testing
We use structural equation modelling (SEM) to estimate the
relationships among the constructs. We use a two-step model building
approach, where the measurement model is tested prior to testing the
structural model (Anderson and Gerbing, 1988).
The proposed model in Fig. 1 is tested by SEM with the maximum
likelihood estimation method using the LISREL 8.54 software. Fig. 2
shows the standardized coefficients for the paths that are significant at
the 0.05 level. The model fit indices are χ2(790)=2066.54,
RMSEA=0.056, CFI=0.97 and NNFI=0.97, which are acceptable.
Based on the significant coefficients of paths in Fig. 2, H1a~H1c,
H2d, H3a, H3b, H4a, H4b, and H5 are supported, while H1d, H2a-c,
and H6 are not supported. In addition, we statistically test the
difference of the effects of lean and agile SCSs on external integration
and find that lean SCSs are more effective than agile SCSs at improving
external integration (Δχ2=6.53, p < 0.05). We also tested the relation-
ships for different industries and results show that firms in different
0.57 industries have different relationships among the variables (Table 4).
Financial 4. Results and discussion
Performance
4.1. The role of OSs in supply chain design
Our results show a clear-cut difference of companies’ OSs in
influencing supply chain design. More specifically, OSs related to cost,
quality and delivery are positively related to lean SCSs. While flexibility
is significantly related to agile SCSs. This finding is consistent with lean
system arguments that lean supply chain aims to achieve the objectives

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Table 4
Regression analyses across industries.

Independent variable Dependent variable

Lean SCS Agile SCS

Age 0.13a, −0.01b, 0.09c, 0.10d, 0.10e, 0.08 f 0.03, −0.01, 0.11, 0.09, −0.17, 0.06
Size 0.04, −0.17*, 0.01, 0.00, −0.05, −0.03 0.16, 0.00, 0.12, −0.17**, 0.11, 0.00
Cost strategy 0.26*, 0.36**, 0.25**, 0.47**, 0.28*, 0.36** −0.27, 0.14, 0.11, 0.02, 0.13, 0.03
Quality strategy 0.29*, 0.16, 0.20*, 0.19**, 0.15, 0.16** 0.18, 0.11, −0.09, 0.04, 0.13, 0.05
Delivery strategy 0.41**, 0.03, 0.17, 0.23**, 0.31**, 0.25** −0.06, −0.18, −0.05, 0.25**, −0.11, 0.02
Flexibility strategy −0.19, 0.13, 0.19*, −0.02, 0.09, 0.04 0.31*, 0.41**, 0.57**, 0.39**, 0.63**, 0.47**
Adjusted R2 0.46, 0.34, 0.42, 0.54, 0.38, 0.44 0.08, 0.16, 0.31, 0.32, 0.48, 0.27
F 8.89** 11.35**, 18.80**, 39.36**, 8.34**, 79.15** 1.83, 4.82**, 12.14**, 16.84**, 11.99**, 36.82**
Internal integration External integration

Age −0.20, −0.22**, −0.14*, 0.00, 0.30**, −0.05 −0.01, −0.12, −0.12*, −0.03, 0.01, −0.07*
Size −0.06, 0.06, 0.08, 0.02, −0.17, 0.04 −0.02, 0.11, 0.15*, 0.03, 0.06, 0.10**
Lean SCS 0.62**, 0.32**, 0.37**, 0.21**, 0.11, 0.32** 0.63**, 0.48**, 0.46**, 0.47**, 0.42**, 0.48**
Agile SCS 0.20, 0.27**, 0.36**, 0.34**, 0.52**, 0.32** 0.23*, 0.29**, 0.37**, 0.29**, 0.48**, 0.33**
Adjusted R2 0.34, 0.29, 0.35, 0.19, 0.34, 0.26 0.35, 0.41, 0.49, 0.39, 0.53, 0.44
F 8.31**, 12.94**, 20.94**, 12.73**, 10.12**, 54.17** 8.63**, 21.61**, 36.08**, 32.57**, 21.31**, 119.64**
Financial performance

Age −0.07, −0.13, −0.11, −0.07, −0.26*, −0.10**

Size 0.01, 0.09, 0.04, 0.12, 0.23, 0.08*
Internal integration 0.43**, 0.45**, 0.41**, 0.46**, 0.55**, 0.45**
External integration 0.25, 0.11, 0.05, −0.05, 0.00, 0.04
Adjusted R2 0.33, 0.33, 0.20, 0.19, 0.27, 0.25
F 8.02**, 15.25**, 10.14**, 12.37**, 7.51**, 49.76**

a
Food and beverage;
b
Electronic, electrical and communication equipment;
c
Machinery and transportation equipment;
d
Textile and garment;
e
Plastic, latex, chemicals and petroleum;
f
All industries;
*
p < 0.05;
**
p < 0.01

of cost, quality, and delivery (Koskinen, 2009). Although quality and
delivery should be order qualifiers for lean supply chain (Mason-Jones
et al., 2000), they still act as order winners in emerging economy
because of their importance for achieving lean production (Agus and
Hajinoor, 2012; Panizzolo et al., 2012). The relationship between
flexibility and agile SCSs is also expected because “agile supply chains
must be flexible, and hence robust, to changes or disturbances and will
in fact exploit the capability to competitive advantage. In contrast, lean
systems aim to minimise internal and external variation as much as
possible” (Naim and Gosling, 2011, p. 343). This also provides an
explanation why flexibility is not significantly related to lean SCS in this
study.
We find that cost strategy is not related to agile SCSs. The reason
may be that, an agile supply chain is inappropriate in a low cost
situation. The order winner of an agile supply chain should be the
service level and its order qualifier should be cost (Mason-Jones et al.,
2000). Manufacturers whose competitive focus is immediate availabil-
ity at low cost should implement a lean supply chain, while those whose
competitive focus is unique design should implement an agile supply
chain (Stavrulaki and Davis, 2010). Thus, manufacturers with a lower-
cost OS should increase their use of a lean supply chain but not an agile
supply chain.
Inconsistent with our expectation, OSs in terms of quality and
delivery have insignificant effects on agile SCSs. There may be two
possible reasons for the insignificant relationship between quality and
agile SCSs. First, the major focus of an agile SCS is to provide a
premium level of customer service in terms of responsiveness and
mastering market turbulence (Van Hoek et al., 2001). Performance
quality is considered a qualifier in an agile SCS (Naylor et al., 1999). On
top of this, an agile SCS can be built upon ‘lean thinking’ (Van Hoek
et al., 2001). If a firm's major target is to provide high quality, it should
consider the lean paradigm as its first priority but not the counterpart.
Thus, there is consistent with Mason-Jones et al. (2000)'s propositions
of match between supply chain design and market requirements.
Second, agile supply chain is more difficult to manage than lean supply
chain in achieving quality strategy. It is not easy to keep quality when
there is always changing demands or design. The deficiency of legal
systems in China makes the situation worse because supply chain
partners may have opportunistic behaviour and sacrifice the quality
standards when responding to changes in a hurry. For example, one of
the ‘crime culprits’ of Mattel's recall crisis in 2007 was the feckless
change in paint supplier by a major Chinese offshoring firm, which
exemplifies the poor regulatory regime in China. Therefore, a firm with
quality as its OS should implement a lean SCS instead of agile SCS.
Past literature suggests that delivery should be an order winner for
agile supply chain if there is a match between supply chain design and
market requirements (Mason-Jones et al., 2000). To our surprise, there
is no significant association between delivery strategy and agile SCSs.
This finding is consistent with a recent study that suggests a movement
of delivery strategy from order winner to order qualifier in current
competitive environment (Roh et al., 2014). Thus, this may be the
possible reason that the configuration between supply chain design and
market requirement changes with the fast development of economy.
The insignificant relationship between delivery and agile SCSs may also
be due to firms’ inefficient logistics capability. A delivery-related OS
requires firms to deliver their products to customers quickly and on
time. While an agile SCS emphasises a flexible network structure and
relationships among supply chain partners, which requires firms
should rely heavily on the premium logistics performance.
Nevertheless, the manufacturing industry of China is under fast
development but the logistics infrastructure of China cannot catch up
the increased economic activities. Firms’ logistics performance is
neither satisfactory nor competitive due to the inertia of state-owned
enterprises and government, laggard transportation regulations, rela-

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Y. Qi et al.
tively low logistics-outsourcing rates, and low logistics integration
(Zhou et al., 2008). Thus, in China, firms with delivery-related OSs
should make lean SCSs but not agile SCSs their first priority.
Our findings suggest that a Chinese firm determined to provide
highly flexible products with low costs, high quality and/or short-
delivery advantages should implement both lean and agile SCSs
accordingly. This finding supports the use of leagile supply chains,
identified in studies by Qi et al. (2009), Naylor et al. (1999), and among
others. The leagile supply chain is a hybrid paradigm in which leanness
and agility are implemented in upstream and downstream supply
chains, respectively (Mason-Jones et al., 2000). Leagility, seen as the
evolution from the lean paradigm to the agile paradigm, can provide a
comparable service level at an acceptable cost and is more popular in
reality than either pure leanness or pure agility (Kisperska-Moron and
De Haan, 2011). Our pattern of alignment between OS and SCS
provides empirical evidences for this evolution.
4.2. SCSs and SCI
Our findings show that no matter which SCS is used by a firm, the
SCI practices are important for the firm. A lean SCS interestingly
focuses slightly more on external integration than internal integration.
Such an external-oriented structure follows the requirements of a lean
supply chain for outside partners’ capabilities in terms of supplier
development, quality of the source, information sharing and JIT
delivery/purchase (Van Hoek et al., 2001; Yusuf et al., 2004).
We find that an agile SCS requires similar levels of both internal
and external integration. Such a structure is very similar to the
balanced supply chain in Flynn et al. (2010), which finds that both
internal and external integration are important for firms to achieve the
best performance. An agile SCS emphasises a quick response and
personalisation. It requires the synchronisation of internal activities
across different functions and responsiveness to the changes. Thus,
compared with lean SCSs, agile SCSs pay more attention to the balance
throughout the process flow in the supply chain.
Another finding is that the need of external integration in an agile
supply chain is lower than that in a lean supply chain. The first reason
may be the novelty and difficulties of Chinese manufacturers to
implement agile SCSs together with supply chain partners. Our field
observations show that the dynamic structure of the supply chain
required by agile SCSs is implemented through the building of flexible
Guanxi among supply chain partners in China. Compared with the
investment in integration, Guanxi is more efficient at making firms
flexible when they are faced with market turbulence. In the emerging
economy of China, the informal control mechanisms, such as Guanxi,
play more important role than formal control mechanisms, such as
integration (Park and Luo, 2001). Thus, firms with agile SCSs are
inclined to pay less attention to external integration. This finding is also
consistent with previous findings and traditional wisdoms. An agile
supply chain should be flexible and focus on effectiveness and rapid
reconfiguration (Naylor et al., 1999). Thus, contrary to a lean supply
chain, an agile supply chain requires a short-term and flexible relation-
ship with suppliers to reconfigure the supply chain structure and grasp
fleeting market opportunities. Stavrulaki and Davis (2010) also find
that an agile supply chain should emphasise a flexible logistics process
and manufacturers with an agile SCS should explore various supplier
and logistics network options to ensure rapid response to customised
demand and supply chain disruptions due to uncertainties. In the
flexible supply chain structure, the focal firm should not commit ample
resources to building a rigid relationship with their partners from the
perspective of transaction cost economics (Williamson, 2008), which
contradicts with the requirements of high level external integration. In
other words, an agile supply chain does not encourage firms to invest
too much in external integration, which leads to a “lock-in” situation
for all supply chain partners. Furthermore, in an agile supply chain, the
major norms are changes, and the costs for firms in such a supply chain
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International Journal of Production Economics 185 (2017) 162–174
to share real-time changing information and coordinate changing
activities are very high.
4.3. SCI and financial performance
As we expected, internal integration is positively related to financial
performance. Contrary to our expectation, there is no significant
relationship between external integration and financial performance,
perhaps because that relationship is mediated or moderated by other
variables (Huo, 2012; Vickery et al., 2003; Yu et al., 2013). For
example, Huo (2012) finds that external supplier and customer
integration indirectly influences financial performance through suppli-
er- and customer-oriented operational performance. Vickery et al.
(2003) find that supply chain integration enhances financial perfor-
mance through customer service. Yu et al. (2013) indicate that
customer integration improve financial performance through the
mediating effect of customer satisfaction. Zhao et al. (2015) provide
another reason for this finding that the effect of supplier and customer
integration on financial performance is nonlinear. Another reason may
be that external integration needs various investments, such as
information technologies, human resources, time, and money, which
offset financial benefits of external integration (Das et al., 2006). Chan
et al. (2010) indicate that customer involvement shifts more power
from the focal company to its customers and brings more workload for
the focal company. As a Chinese finding, the nonsignificant relationship
between external integration and financial performance is also con-
sistent with those of Flynn et al. (2010). One possible reason is that
firms in China rely on Guanxi to link with supply chain partners rather
than formal external integration for financial performance. Another
possible reason may be that technologies and management skills in a
developing country like China are relatively too weak to enhance
financial performance greatly. Our findings enrich the SCI-perfor-
mance literature and deepen our understanding of the SCI-perfor-
mance relationship, especially in an emerging market like China.
5. Theoretical and managerial implications
Through an extensive literature review, Naim and Gosling (2011)
found that most studies on SCSs have been conceptual, and therefore
case studies and large-scale empirical studies are required in this field.
Our study answers this call and investigates China's SCSs using a large-
scale survey. Our study contributes to the SCM literature by extending
the prior studies on the effects of product characteristics on SCS and
extends the literature on the relationship between SCSs and other firm
strategies. Our findings show that, in addition to business (e.g. Qi et al.,
2011) and corporate strategies, OSs are accurate and appropriate SCS
antecedents. Our findings validate the important alignment between
SCS development and the determination of order winners and quali-
fiers. Furthermore, our large-scale survey of Chinese manufacturers
contributes to our knowledge of OSs in developing countries. The cost
advantages of Chinese manufacturers are manifested in their SCM and
operations management, enhancing our understanding of OSs, SCSs
and SCI practices of firms in emerging economies like China.
Our findings on SCSs and SCI contribute to the SCM theories. We
find that SCSs can be achieved through SCI, leading to competitive
advantages. This study supports the strategy- conduct-performance
framework and provides a procedure for managers to achieve compe-
titive advantages by aligning their strategies and practices. Previous
studies have called for more research on SCI antecedents (Zhao et al.,
2008, 2011), and this study echoes this call and covers the gap between
strategy and integration practices in supply chains. Our findings also
supplement the explorative case studies of Hilletofth (2009) by
providing large-sample empirical evidence for how internal and
external integration are used to achieve SCSs and OSs. Managerially,
our findings suggest that firms with different SCSs should develop both
internal and external SCI capabilities, but the priorities are different.
Y. Qi et al.
For example, firms in a lean supply chain should integrate with
external partners first, then integrate among internal functions,
whereas firms in an agile supply chain should develop a balanced
supply chain with equal emphasis on internal and external integration.
In conclusion, this study extends the theory of organizational
capability from a sole firm context to a supply chain context. Few
previous organizational capability studies investigated relationships
among different types of organizational capabilities, thus we know little
about the development mechanism regarding different kinds of orga-
nizational capabilities. This study shows that OS and SCS capabilities
are the base of SCI capabilities, shedding light on the “black box” of
organizational capabilities. External integrative capabilities are crucial
for firms to achieve financial performance. Through effective manage-
ment of operations and supply chain capabilities, firms are more likely
to acquire and absorb knowledge quickly and effectively, which leads to
competitive advantages.
The managerial implications of these results are that a successful
firm should develop a clear and appropriate OS according to the
determination of order qualifiers and winners from customers. For a
firm that selects low-cost, high-quality and/or short delivery as its
competitive priorities, a lean SCS is the better choice. In contrast, for a
firm that selects high flexibility as its competitive priority, an agile SCS
is the best choice. In details, managers need to develop lean supply
chains to achieve the operations objective of cost, quality, and delivery,
in contrast, to develop agile supply chains to achieve the operations
objective of flexibility. In addition, managers should work together to
design OSs and SCSs and pay attention to how they are linked. If a SCS
is not consistent with an OS, the firms have divergent objectives and
should spend extensive resources on coordinating the strategies,
thereby increasing the coordination costs and reducing the efficiency
of the operations (Koskinen and Hilmola, 2008). In details, managers
need to evaluate their OSs before they form their SCSs. If a firm only
focuses on cost strategy, a lean SCS is enough for the firm to pursue low
cost OS. When the firm also has cumulated quality and delivery
strategies, the lean SCS is still useful for the firm to achieve the
operations objectives. However, if the firm moves to pursue flexibility
strategy, the firm needs to cumulate their lean SCS to leagile SCS. The
finding about cumulated OSs and SCSs and their relationships can help
Appendix A. Items and scales
See Tables A1– A5.
Table A1
EFA of supply chain strategy.
Our supply chain structure often changes in order to cope with volatile market
Our supply chain need to maintain a short and flexible relationship with a large number of suppliers
Our supply chain provides customer with personalized products
Our supply chain selects the suppliers based on their performance on flexibility and responsiveness
It is necessary for our supply chain to maintain a higher capacity buffer to response to volatile market
Our supply chain always faces the volatile customer demand*
Our supply chain reduces any kind of waste as much as possible
Our supply chain selects the suppliers based on their performance on cost and quality
Our supply chain needs to maintain a long and rigid relationship with a small number of suppliers
Our supply chain supplies predictable products
Our supply chain structure seldom changes*
Our supply chain reduces costs through mass production*
Eigenvalue
Total variance explained
*
Dropped from the final construct due to the low factor loading (below 0.50)
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International Journal of Production Economics 185 (2017) 162–174
managers to learn and cultivate their OSs and SCSs and match them in
an effective way. More importantly, inconsistent SCSs and OSs may
push firms to develop organizational cultures that are inconsistent with
those of their supply chain partners, leading to the disruption of the
supply chains.
In order to achieve better financial performance in emerging
economies like China, managers should focus more on internal
integration than on external integration. In order to focus on internal
integration, a lean SCS is better for Chinese manufacturing firms.
Similarly, in order to focus on lean SCS, managers should pay attention
to OSs in terms of cost, quality, and delivery. These paths provide
directions for managers to pursue super financial performance.
6. Limitations and future directions
Although this study makes significant contributions to the literature
and practices, it has several limitations. First, OSs are not context free
and may vary from country to country if their competitive environ-
ments are different (Frohlich and Dixon, 2001). Therefore, it should be
acknowledged that the findings in this study may not be easily
generalizable to other countries. Our model can be extended and
explored in different areas, especially in different emerging markets
that face various transitions in the environment. Kisperska-Moron and
De Haan (2011) explore a Polish distributor's change in SCSs and
highlight the importance of the effect of institutional and market
transition. Soni and Kodali (2012) test the reliability and validity of
SCS constructs in India. However, studies like these have been rare.
More rigorous studies, especially cross-cultural studies on SCSs, are
imperative. Second, this study uses a cross-sectional design. It may be
interesting for future research to examine the coevolution of OSs, SCSs
and SCI. Naim and Gosling (2011) identify the on-going debate around
the differences and similarities among various SCSs and encourage the
use of longitudinal study and action research to clarify this debate.
Third, we only examine SCI from the perspective of firm boundaries.
Future studies can explore additional aspects of SCI from more
perspectives, such as information sharing and process coordination
(Huo et al., 2013). Finally, while we use only two items to measure
delivery, future studies could use additional items.
Agile SCS Lean SCS
0.779 0.005
0.731 0.143
0.715 −0.039
0.668 0.201
0.546 0.262
NA NA
0.188 0.778
0.170 0.770
0.083 0.738
0.005 0.738
NA NA
NA NA
2.467 2.417
54.277%
Y. Qi et al. International Journal of Production Economics 185 (2017) 162–174

Table A2
EFA of operations strategy.

Cost strategy Flexibility strategy Quality strategy Delivery strategy

Manufacture the product at lower cost 0.826 0.201 −0.066 0.160

Manufacture product with high productivity 0.795 0.097 0.288 0.211
Ability to increase the capacity utilization 0.785 0.138 0.343 0.225
Ability to rapidly introduce new product to market 0.086 0.829 0.152 0.187
Ability to rapidly change product mix 0.186 0.827 0.099 0.030
Ability to provide broad product line 0.130 0.707 0.200 0.266
Provide highly durable product 0.039 0.233 0.858 −0.021
Provide product with high conformance quality 0.306 0.137 0.729 0.279
Provide highly reliable product 0.178 0.108 0.699 0.421
Ability to meet the delivery schedule 0.226 0.171 0.311 0.793
Ability to provide short delivery time 0.348 0.316 0.088 0.725
Eigenvalue 2.288 2.154 2.140 1.636
Total variance explained 74.708%

Table A3
EFA of supply chain integration.

External integration Internal integration

Establishing strategic partnership with suppliers 0.741 0.142

Sharing information with suppliers 0.695 0.218
Working with suppliers to improve inter-organizational processes with suppliers 0.688 0.253
Establishing strategic partnership with customers 0.660 0.326
Working with customers to improve inter-organizational processes with customers 0.645 0.359
Long-term relationship with suppliers 0.624 0.238
Creating linkage with suppliers through information technology 0.614 0.338
Collecting customer feedbacks for quality improvement 0.613 0.187
Creating linkage with customers through information technology 0.551 0.418
Sharing information with customers 0.536 0.395
Enterprise application integration among internal functions 0.286 0.801
Integrative inventory management 0.292 0.786
Data integration among internal functions 0.264 0.785
Real-time integration and connection among all internal functions from raw material management through production, shipping, 0.259 0.737
and sales
Eigenvalue 4.395 3.323
Total variance explained 55.129%

Table A4
EFA of financial performance.

Financial performance

Return on investment (ROI) 0.853

Growth in ROI 0.852
Growth in ROS 0.839
Return on sale (ROS) 0.808
Growth in market share 0.781
Market share 0.737
Eigenvalue 3.964
Total variance explained 66.061%

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Table A5
CFA results.

Standardized factor loading T-value

Lean SCS
Our supply chain supplies predictable products 0.56 –
Our supply chain reduces any kind of waste as much as possible 0.70 12.32
Our supply chain need to maintain a long and rigid relationship with a small number of suppliers 0.64 11.66
Our supply chain selects the suppliers based on their performance on cost and quality 0.77 12.97

Agile SCS
It is necessary for our supply chain to maintain a higher capacity buffer to response to volatile market 0.51 –
Our supply chain provides customer with personalized products 0.57 9.60
Our supply chain selects the suppliers based on their performance on flexibility and responsiveness 0.61 9.97
Our supply chain need to maintain a short and flexible relationship with a large number of suppliers 0.65 10.31
Our supply chain structure often changes in order to cope with volatile market 0.68 10.48

Cost strategy
Manufacture the product at lower cost 0.64 –
Manufacture product with high productivity 0.82 16.44
Ability to increase the capacity utilization 0.89 17.11

Quality strategy
Provide product with high conformance quality 0.82 –
Provide highly durable product 0.64 15.27
Provide highly reliable product 0.76 18.38

Delivery strategy
Ability to meet the delivery schedule 0.79 –
Ability to provide short delivery time 0.73 17.06

Flexibility strategy
Ability to provide broad product line 0.72 –
Ability to rapidly introduce new product to market 0.78 16.29
Ability to rapidly change product mix 0.71 15.22

Internal integration
Data integration among internal functions 0.76 –
Enterprise application integration among internal functions 0.80 19.36
Integrative inventory management 0.79 19.28
Real-time integration and connection among all internal functions from raw material management through production, shipping, and 0.73 17.52
sales

External integration
Collecting customer feedbacks for quality improvement 0.60 –
Long-term relationship with suppliers 0.63 12.70
Establishing strategic partnership with suppliers 0.66 13.17
Working with suppliers to improve inter-organizational processes with suppliers 0.67 13.27
Creating linkage with suppliers through information technology 0.66 13.16
Sharing information with suppliers 0.67 13.37
Establishing strategic partnership with customers 0.71 13.84
Working with customers to improve inter-organizational processes with customers 0.71 13.90
Creating linkage with customers through information technology 0.66 13.15
Sharing information with customers 0.63 12.71

Financial performance
Return on Investment 0.82 –
Return on Sale 0.77 20.90
Market share 0.67 17.56
Growth in ROI 0.82 23.06
Growth in ROS 0.81 22.58
Growth in market share 0.73 19.62

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